MSME Loan
MSME loan is a credit option for individuals, businesses, startups, and MSMEs (Micro Small and Medium Enterprises) for setting up a new business, meeting working capital and cash flow requirements, purchasing new equipment and machinery, paying salary of the staff, or for expansion purposes. Various banks and other lenders provide MSME business loans to their customers in India.
MSME Loan Details
| Loan Amount | Minimum Rs. 30,000 - Rs. 1 Crore |
|---|---|
| Rate of Interest | Based on the applicant’s profile & business requirements |
| Repayment Tenure | Maximum 15 years |
| Processing Fees | 0% - 3% of the loan amount |
| Collateral | Not required in case of unsecured business loan |
| Foreclosure Charges | 0% - 4% of principal outstanding |
| Subsidy | Offered by some lenders |
| Types | Working Capital Loan, Bill discounting, Overdraft, Cash Credit, Letter of Credit, Bill of Purchase, Merchant Cash Advance, etc. |
MSME Loan Interest Rates
MSME loan interest rates vary from one lender to another. For example, SBI SME loan interest rate starts from as low as 8.80% p.a. whereas HDFC MSME business loan interest rate starts from 11.90% p.a. Various factors are considered by lenders when deciding the interest rate on MSME Loan, including the applicant’s profile, credit score, age, income, turnover, business reputation, experience, and so on.
If borrowers have a good credit score, they can get low MSME interest rates. A credit score is a three digit number generated by credit bureaus that summarize an individual’s credit repayment history. A credit score above 750 is usually considered good for MSME Loans, but that doesn’t mean you cannot get an MSME Loan with a lower credit score. You can still apply for a loan from some lenders even if your CIBIL score is 650 or above.
To get instant approval and an attractive interest rate deal on the MSME loan scheme, maintaining a good credit score is always helpful.
Features of MSME Loan / SME Loan
- Instant approval and loan disbursal.
- Affordable interest rates.
- Loan amount available up to Rs. 1 Crore.
- No collateral or security required for unsecured business loans.
- Repayment tenure varies from 1 to 15 years.
- Flexible repayment options available.
- Minimal paperwork and hassle-free processing.
- Multiple types of schemes catering to all business-related needs of the borrowers.
Eligibility Criteria for MSME / SME Loans
Following are the detailed MSME loan eligibility:
- Eligible entities: Self-employed individuals, self-employed professionals, business owners, SMEs, MSMEs, women entrepreneurs, Private/ Public Limited Companies, Partnership Firm, Sole Proprietorship, and Limited Liability Partnership that are engaged in trading, services & manufacturing sectors.
- Minimum business vintage requirement to meet MSME loan criteria: 1 year.
- Minimum business turnover requirement: Varies from bank to bank
- Credit history: Good credit score and repayment history with financial stability
Documents Required for MSME Loan
- Identity proof: Aadhaar card, passport, PAN card, Voter’s ID card, etc.
- Residence proof: Rental agreement, utility bills, ration card, etc.
- Business address proof: Lease agreement, utility bills, or rental agreement.
- Income proof: P&L account & balance sheet of last 2 years, income tax returns, sales tax return, PAN card, project report, etc.
- Proof of securities (if provided): Photocopies of title/ lease deeds offered as securities.